Commodities from coal to nickel soar as traders shun Russia exports ahead of possible supply disruptions

  • Prices of major commodities surged as Russia’s invasion of Ukraine fueled fears of supply disruptions
  • Coal, nickel and wheat rose as traders sought alternative supplies after Western sanctions hit Russia.
  • Russia, a major commodities exporter, is a key energy supplier and a dominant figure in the metals trade.

Commodities from coal and oil, to nickel and aluminium are skyrocketing this week, as traders scramble to find alternative sources of supplies of raw materials in light of hefty sanctions on Russia that could ultimately cut off its exports.

Russia is a key exporter of vital commodities, such as nickel, for stainless steel production; coal, oil and gas, as well as palladium for the manufacture of autocatalysts, and wheat. Although there have been no direct embargoes on its exports at this time, commodity traders in Europe are rushing to secure supplies from elsewhere to avoid getting stuck with cargoes they may not be able to sell on if Western pressure on Moscow ratchets higher, analysts have said.

Wheat surged to its highest since mid-2008, gaining 6% on the day to reach $1,125 a bushel, while coal jumped 10% to a record high above $400 per tonne on Thursday. 

Benchmark natural gas prices hit record highs earlier on Thursday, bolstered by the growing concern over possible disruption to the flow of gas from Russia, which supplies roughly 40% of European Union demand. Although supply through the pipeline, which crosses Ukraine, has continued unabated since the invasion of Ukraine on February 24, according to data from pipeline operator NordStream, prices have soared.

“European coal and gas prices trade up more than 85% since Russia attacked Ukraine and it highlights the risk of supply disruptions for both,” said Saxo Bank’s strategy team.

Crude oil has soared to almost $120 a barrel as a result of the squeeze on energy supplies, hitting its highest since 2014. Russia supplies roughly 10% of the world’s crude and, right now, is hard-pressed to find any traders to buy its cargoes.

“Very few trading, shipping and insurance companies will be prepared to take the risk of dealing with cargoes from Russia, fearing either physical attack, payment issues because of financial sanctions, the risk of non-delivery if further measures are enacted against Russia, and even public and investor backlash for continuing to do business with a country now largely viewed as conducting an illegal war,” Reuters commodities columnist Clyde Russell said in a column last week.

Beyond the energy complex, nickel futures on the London Metal Exchange climbed 8.94% to $2,820 ton, the highest level in over a decade, while aluminum futures rose 4.09% to $3,715 a tonne. Palladium, a precious metal used predominantly in the production of catalytic converters, jumped 3.04% to $2,750 per ounce on Thursday, near last May’s record above $3,000. Gold meanwhile rose 0.74% to $1,935 an ounce, buoyed by investor demand for safe-haven assets.

“There seems to be no end to the rally in metals prices,” strategists at Commerzbank said.

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